Tales from a school classroom

A few months ago a neighbour’s son told me that he was thinking of studying Economics for A-level. I suggested that there were more useful subjects, like chemistry, or woodwork or cookery. If he studied economics he would learn things as they were not, in other words it was worse then useless, and that if he wanted to learn about economics, he should take a Saturday job in a street market, which would be more fun and he would make a bit of money. Or he could take up street busking, because then he would learn what he would never be taught in the classrom, This is explained in Sounds from the Deep which you can read elsewhere on this web site, and shows how the Law of Rent works. The famous economist David Ricardo formulated it in the early nineteenth century, using fields of corn as his example, but somehow it has been forgotten, because modern economists claim that nowadays economies are commercial and industrial, and so land is not important any more. To take such a view must require a well-developed capacity to ignore what is going on all around, when urban land can be worth a million times more than land used for growing crops, and where the world’s financial system has just been thrown into chaos by a the collapse of a land price boom fuelled by reckless lending and reckless borrowing,

My suggestions were not well received by the boy’s mother, who has a background in sociology and retains a sneaking admiration for Marx, and he started his studies in September. These began promisingly with an explanation that economic activity is about the creation of wealth through the application of human labour to land. But somehow, the term “wealth” was not defined and he has come away with the impression that wealth is anything that can be sold or exchanged for anything else, which therefore includes slaves, land, and pieces of paper with pictures of the British Queen, historical figures, or miscellaneous symbols..

Halfway through term, the class has been told to write an essay on the British economy and its performance over the past decade, with reference to the Gross National Product and unemployment. Why economists think the GNP is important is a mystery in itself. If you eat a meal at home, made from home-grown vegetables, it does not appear in the GNP statistic. If you buy a ready-made one with ingredients that have been brought half-way round the world, it adds to the GNP, and so does the cost of getting rid of the wrapping materials. Better still for the GNP is to eat the meal in a restaurant, preferably driving there or going in a taxi. The GNP takes no account of the fact that the meal cooked at home from home-grown food is of better quality. Recycling and re-use are also bad for the GNP.

All this would not matter if the GNP was regarded merely as a figure of interest to economists and taken with a pinch of salt. But it isn’t. Governments round the world use GNP as a target and it a major driver of economic policies. It is probably the main reason for the contemporary obsession with “growth”, which has little or no correlation with the advancement of human happiness and is wrecking the planet.

And what can be said of the unemployment figures? They too need to be taken with a pinch of salt. Many people who are unemployed are classed as being “incapacitated”. This has made the unemployment statistics look better than they are. Some newspapers like to make out that most people on Incapacity Benefit are idlers, but initially, at least, the majority would like to work and would do so if there was suitable employment available. But over the age of 50, people are starting to get crotchety and employers prefer youngsters, especially as many find it difficult to manage staff who are the same age as their parents. Once the new benefit rules come into force, the unemployment statistics will look worse for a while, until people give up being “jobseekers”, since what is the point of jobseeking in a recession? Those people will drop out of the statistics and the government will be able to claim that things are getting better.

An equally serious criticism of these statistics is that they aggregate that which should not be aggregated. If unemployment is broken down by region, a different picture emerges, with figures for marginal locations having remained persistently higher throughout the boom period. I mentioned this to the student and he attributed it to social class – there being more “working class” people in, for example, the north of England. But that explanation begs a question. Why should there be more working class people in the north?

I pointed out that production costs are higher, for a start. Raw materials and components have to be transported further, as do the finished products, especially if they are going to be exported to Europe. Costs such as heating are higher in the North of England. Management costs are higher, as managers are liable to have to travel long distances to meet suppliers and customers, whilst consultants also have to pass on the cost of their journeys and the extra time spent.

His retort was that not everything was more expensive. His brother, he told me, has a house in the East Midlands which has cost a fraction of what he would have had to pay in the south. I was beginning to explain that the low price of houses, in reality, the low price of housing land, was a consequence of the fact that the town was a relatively unattractive area for manufacturing and entirely undesirable for the service industries which have fuelled the boom in the south of England. But there was no time to continue the discussion. Had the class been given a better grounding in the role of land in the economy, the student would have begun to understand the point. This one will run and run, I think.